On September 14, 2017, Bill 154, The Cutting Unnecessary Red Tape Act, 2017 passed first reading. As of October 3, 2017, it continues to be debated as part of second reading. If fully implemented, the bill would streamline business and not-for-profit regulations in Ontario through a number of modifications to the Corporations Act.
Implementation of Technology
Bill 154 allows for the greater use of technology in the management of businesses governed by the Corporations Act:
- The filing, keeping and searching of documents in electronic format is accommodated;
- Members are permitted to have meetings by telephonic or electronic means, unless the by-laws of the corporation provide otherwise; and
- Electronic notices of meetings of members are permitted unless the by-laws of the corporation provide otherwise.
Directors
Directors are also impacted by a number of proposed changes that are aimed at achieving transparency and increasing efficiency:
- Directors will no longer be required to be members of the corporations that they serve;
- The removal of directors will now require only a majority vote of members;
- Vacancies arising from a removal can be filled in the same member's meeting where the director is removed; and
- A codified, objective standard of care for directors, requiring them to (1) act honestly and in good faith with a view of the best interests of the corporation; and (2) exercise the care, diligence and skill that a reasonable prudent person would exercise in similar circumstances. No contract, governing document, by-law or resolutions can relieve directors of these duties.
Natural Person Capacity
The bill proposes to grant corporations the rights, powers and privileges of a natural person, subject to any restrictions put in place by the corporation's governing documents. A corporation's acts will be deemed to be valid even if the corporation acted contrary to its governing documents.
Contracts Entered into Prior to Incorporation
Under a new proposed section, if a person enters into a written or oral contract on behalf of a corporation before it comes into existence, the corporation may later adopt the contract, becoming bound by it and entitled to any benefits of the contract. The person who initially acted on behalf of the corporation would then cease to be bound or entitled to any benefits under the contract.
Waiver of Auditor and Audit
Through an extraordinary resolution, members may decide not to appoint an auditor and have an audit in respect of a financial year if, in that year, the corporation had annual revenue of less than $100,000 or any other amount prescribed by regulations.
Continuance of Corporations in other Jurisdictions
Corporations will be prohibited from applying for an instrument of continuation in another jurisdiction unless the laws of that jurisdiction provide that the corporation continues to be liable for its obligations, any existing cause of action, claim or liability to prosecution and that actions and proceedings by or against he corporation may continue, with any judgements or orders enforced.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
